Intel maintains Ultrabook delusions

Nick Farrell, 17th April 2013

Fashion bag maker Intel seems set to go the way of the other fashion outfit, Christian Lacroix.

On the eve of releasing his spring collection, fashion designer Paul Otellini demonstrated his same creative flare in dealing with the media in spinning a silk purse from pure dog poo.

Most outfits, faced with the sort of figures that Intel is facing, would be reconsidering their entire collection, but Otellini is convinced that he is creating the new black even if he is just seeing red figures everywhere.

In the first quarter results, there was a 25 percent drop in profits and most Wall Street investors think that it is all due to the decline of the PC business and Intel's weak position in the market for mobile chips.

To make matters worse, Intel's CFO Stacy Smith said that sales drops are to be expected during the "transition" from the old, dying form of the PC to the new era of mobiles, tablets and hybrids of the two.

In fashion terms he is claiming that people are moving from the old reliable black cocktail dresses to something more in the lines of Jean Paul Gaultier.

Smith claimed that Intel has made a lot of investments in the fabric and is convinced that the fashionable types will buy it, but it admits that so far no one has. The spring collection includes Haswell and that should improve things, he said.

However Smith appears to be ignoring the fact that Intel's mobile chip sales are actually falling. They are down nine percent which is faster than its traditional PC chip business which is down six percent. Haswell might improve things, but you would expect to see some commitment to Intel's mobile designs now, rather than people running away.

At the centre of Intel is the shy and retiring Paul Otellini who appears to be using his final conference call with analysts to tell them that everything is in safe hands, even as he is emptying his desk.

He made the strange claim that analysts should not look at the quality but should feel the width. Intel's position has never been stronger, largely because of manufacturing technology that creates transistors on its chip that consume less power and are less expensive than any other on the market.

In other words Intel has great products even if no one wants to buy them. Otellini suggested eventually people will want Intel chips inside their smartphones or tablets.

He claimed that Intel's core architectural and manufacturing strengths have never been more valuable. We are not sure how it can be that if you are designing things that no one wants to wear, making gizmos that no one wants, you can have much value at all.

Yet Otellini is calling for Intel to hold the line and it is still claiming that it will be able to stick to its somewhat bullish future projections.

It seems to be doing this by cutting its capital spending from $13 billion to $12 billion.

Analysts had expected $12.588 billion in revenue for the first quarter and $12.854 billion for the June quarter.

Intel posted first-quarter net income of $2.04 billion down from $2.74 billion a year ago.

Otellini trotted out the same rubbish about how Ultrabooks are going to save the company and the universe. At the same time Otellini had to admit that Ultrabooks have been a disaster.

So far Ultrabooks have a higher price and heavier weight than conventional tablets and nothing that Intel says can make this better.